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Global trade growth slumps in 2015 but upswing expected in 2016

A Global Trade Forecast report from HSBC notes that a downturn in global trade in 2015 has subdued growth to levels not seen since 2009 but predicts a cyclical return to more robust growth in 2016.

The pre-crisis average pace of growth in the volume of merchandise trade was around 6-7% a year, states the report. According to HSBC, merchandise trade growth slowed abruptly in the first half of 2015 and is now expected to grow by just 1% in volume terms over the year as a whole, down from 3.1% in 2014. The bank's analysts called this growth a “big disappointment” and go on to say that, excluding 2009, “the last time growth in world trade volumes dipped below 2% was in the ‘dotcom bust’ period of 2001. Even in the early 1990s recession, world trade growth was stronger than it is at present.”

The report also found that there are lower levels of business confidence in the near-term trade prospects in the second half of 2015, with the majority of the study's respondents (64%) expecting trade volumes to increase over the next six months, which is 11 percentage points lower than in H1 2015.

Underlying factors in the global trade slowdown

The following trends were identified as some of the underlying factors in the global trade slowdown:

  • The downturn in industrial production in China is having knock-on effects on supply chains and general demand. However, next year sure see a stabilisation of conditions in China, which will lead the way for a moderate recovery in global trade growth.
  • Asia and 'south-south' trade will be the main drivers of global trade growth in the next few years.
  • Import volumes in leading emerging markets, such as China, Brazil and Russia, have been especially weak, leading to a sharp slowdown in world trade growth in 2015.
  • Indications are that the downturn is cyclical rather than structural, giving hope for a recovery in 2016.
  • As an indicator of global container trade volumes, growth in traffic through the Suez Canal slowed sharply to 2.3% in the year to September from an annual rate of 10% at the start of this year.

Reasons for optimism

However, there are also reasons for optimism:

  • HSBC analysts believe that a cyclical recovery will unfold over the next few years, allowing growth to gradually climb back towards its long-term average pace, with cyclical stabilisation in the Chinese economy being an important factor that underpins stability in the global economy.
  • The pick-up in investment growth in the US and in the three largest Eurozone economies through 2016 should spur demand and trade in capital goods sectors.
  • Meanwhile consumer spending in the developed economies should grow at broadly similar rates in 2016 versus 2015, underpinning trade growth in consumer sectors.

CTMFile take: global trade downturns and upswings affect all areas of corporate treasury, particularly FX and commodity risk management, as well as pricing and profits across all businesses.

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